The UK government is expected to present a new White Paper on customs arrangements on Friday, but UK business leaders are stepping up pressure for an “off-the-shelf” Brexit deal.
Nine months before the UK leaves the EU, everything is still under negotiation and there is declining business confidence.
Government and Party Unity
Prime minister Theresa May is expected to present a third policy proposal on Friday, which will not be the so-called MaxFac (maximum facilitation) technology-intensive deal. She hopes the paper will carry the weight of her cabinet.
May made clear on Monday she wants the Customs relations with the EU clarified prior to the end of the transition period in December 2020. In the days leading up to Friday, May is due to meet the Dutch Prime Minister Mark Rutte (Tuesday) and the German Chancellor Angela Merkel (Thursday).
For months, the Conservative government has been accused of negotiating with itself rather than Brussels, as the pro-business and the Eurosceptic parts of her cabinet continue to disagree. The same instability is present in parliament, where May leads a minority government dependent on the support of the ultra-conservative Democratic Unionist Party (DUP).
Support from DUP makes a deal that will accommodate the unity of Ireland more complicated. The DUP insists that Northern Ireland can have no special regime, distinct from the rest of the UK. Theresa May has long insisted she is committed to a deal that will not entail a “hard border” in Northern Ireland, while the Republic insists there can be no border in Ireland.
A deal addressing the Irish border issue must be made before the end of the transition period in December 2020, as the UK government has signed onto a “backstop” deal that would entail the north of the island remaining in the Customs Union and the Single Market, moving the border to the Irish Sea.
What is the model the British government will put forward on Friday remains unclear, although there is media speculation that it may entail a form of Customs cooperation on goods but not on services.
Meanwhile, pressure from business circles to secure clarity is stepping up.
Siemens, Airbus, Nissan and BMW are considering relocation of their production, while for Jaguar-Land Rover plans are already underway. In services, 75% of business leaders express pessimism on Brexit negotiations, a Confederation of British Industry (CBI) survey showed yesterday.
On Tuesday, the CBI presented the government with a list of 23 unaddressed questions for the “real-world,” which included issues such as tariffs, VAT charges and broader regulation.
Members of Parliament asked Chancellor Philip Hammond and the Bank of England Governor Mark Carney to produce an impact assessment of Brexit.
According to a letter seen by Reuters on Tuesday, the Parliament’s Treasury Select Committee has asked the Chancellor and the Financial Conduct Authority for an impact study on the economic and fiscal impact of a “no-deal” Brexit.